Pan American Drops 10% On Plans To Acquire Tahoe: Look for More Risk Before A Cyclical Bounce

The mining company announced that it would acquire Tahoe Resources Inc (NYSE: TAHO), which shot 48 percent higher on the news.

While there may be additional near-term risk, we believe Pan American is setting up for a bounce.

Pan American Silver Corporation Stock Weekly Chart

Pan American agreed to purchase Tahoe for 1.07 billion in a cash and share deal, which will make the combined entity into one of the largest silver miners in the world. The combined entity will benefit from a new cost structure and will have twice the silver reserves.

In analyzing the market cycles for the company, we can see it is in a declining phase with a near-term bottom due in the coming weeks. As such, the was a good spot for a capitulation. Looking forward, our projection is for the stock to test $12, which will likely be a good spot to form a bottom.